Greencross, TPG keep $675 million deal on tight leash

Greencross directors who hold about 7 per cent of the shares support the scheme and institutional shareholders who account for another 10 per cent are likely to vote in favour in the absence of a higher offer.

It's a big call from Global Alpha. The last time Greencross shares were trading at more than $7 was March 2017, when the pet and vet care retailer had just delivered a 17 per cent increase in first-half profit and was talking up its integrated one-stop shop strategy.

The optimism did not last long and Greencross shares fell 45 per cent over the next 18 months as the retailer spiralled south; it downgraded profit guidance, parted ways with former chief executive Martin Nicholas, launched a cost cutting program under new CEO Simon Hickey and put the brakes on store refurbishments and capital projects as debt reached uncomfortable levels.

By September 2018 - when online behemoth Amazon launched its pet offer in Australia - the shares had fallen as low as $3.86, prompting TPG to come back for another look after its $6.75 a share offer two years earlier in conjunction with The Carlyle Group was dismissed by the board.

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The Greencross board needed little convincing to invite TPG into the data room and eventually recommend the $5.55 a share offer through a scheme of arrangement.

It is understood Greencross directors who hold about 7 per cent of the shares support the scheme and institutional shareholders who account for another 10 per cent are likely to vote in favour in the absence of a higher offer.

Greencross' second largest shareholder, Mathews Capital, for example, was prepared to accept $5.40 a share for about 1.5 million of its shares in the last week.

In reports on Tuesday, Deutsche Bank described TPG's offer as "compelling" in light of the pressure on earnings and Greencross' stretched balance sheet, while UBS said the shares were likely to fall if the takeover offer failed.

Some of TPG's rivals even said that at $5.55 a share the private equity firm was overpaying and they couldn't get offers to stack up at $5.20.

Greencross shares were trading just below the offer price at $5.43 on Thursday, reflecting the time value of money (the scheme meeting won't be held until the first quarter of 2019) and the view that a higher offer appears unlikely.